Trio of big contracts have problems

The past few weeks’ major news on large government contracts has been contentious.

Indiana fired IBM Corp. from its job as prime contractor on a $1.34 billion, 10-year award to overhaul the state’s applications for food stamps, Medicaid and other welfare benefits.

“The fraud appears to have been stopped,” said Gov. Mitch Daniels. “And we’re still on track to save taxpayers hundreds of millions of dollars, but the intended service improvements have not been delivered, and that’s not acceptable.”

An IBM spokesman disputed the state’s claims, calling its actions unjustified and, an Associated Press report states, stopped short of announcing legal proceedings against the state, saying: “IBM will take action as appropriate to protect its rights under its contract" with Indiana's Family and Social Services Administration.

If Indiana is displeased with IBM’s performance, it has apparently found subcontractors’ work acceptable. The state will continue to work with IBM’s subcontractors, including Affiliated Computer Services Inc., recently acquired by Xerox Corp. for $6.4 billion.

In Virginia, Northrop Grumman Corp. was hit for its handling of a $2 billion contract to transform the state’s information technology infrastructure, including 59 projects for 72 agencies at more than 2,000 sites.

In an Oct. 13 briefing, the state’s Joint Legislative Audit and Review Commission charged that in awarding the contract for the project in 2005, “low priority was given to the vendor’s prior experience and understanding of the state’s needs.”

The company has delivered some positive change, the commission said, including replacing 42,200 of 57,500 aging PCs and improving the availability of some applications. But those improvements have not been offset by the company’s missed deadlines, cost overruns and technical shortcomings, the commission said.

Northrop Grumman countercharged that responsibility for identifying unmet needs should lie with the Virginia Information Technologies Agency (VITA). The company added that it has been hampered by the state’s failure to deliver timely security clearances, allow direct access to agencies and provide up-to-date agency site data. Northrop Grumman officials said they are already dealing with the problems cited in the report.

Virginia has continually tinkered with its IT governance structure since its inception a decade ago. In 2003, the state created an IT Investment Board, hired a chief information officer and combined IT departments into VITA, with IT oversight duties split between the state CIO and VITA. The latest controversy led to the ousting of the state CIO earlier this year and pressure from state legislators to deal with the problem.

Northrop Grumman will likely retain the contract, possibly because canceling it during fiscal 2010 would cost Virginia $400 million, which auditors said the state can’t afford.

At the Transportation Security Administration, Unisys Corp. is continuing its campaign to hold on to a lucrative contract to manage the Homeland Security Department agency’s IT infrastructure. The company was the incumbent on the infrastructure project since winning a $1 billion award in 2002. Unisys joined General Dynamics Corp. in a protest filed Oct. 13 of TSA’s award of the $493 million, five-year IT Infrastructure Program (ITIP) contract to Computer Sciences Corp. A decision is due Jan. 21, according to the Government Accountability Office’s Web site.

Protests followed TSA’s elimination last year of three competitors: EDS Corp., Northrop Grumman Corp. and Unisys from final bidding on the ITIP task order under DHS’ Enterprise Acquisition Gateway for Leading Edge Solutions contract. TSA subsequently let six companies, CSC, EDS, General Dynamics, Lockheed Martin Corp. (a partner on CSC’s team), Northrop Grumman and Unisys, submit best-and-final offers.

The protest stopped CSC's work on the contract, a CSC spokesman said. The company had been working on a 90-day transition plan that started when it signed the contract in late September.

However, recent news wasn’t bad for everyone: Five companies won a share of the Federal Emergency Management Agency's $500 million Centralized Operations, Maintenance and Management IT contract.

BAE Systems Inc., EDS, Perot Systems Inc., Science Applications International Corp. and Unisys will compete for task orders under the contract to provide operations and maintenance support for FEMA’s IT systems, which are used during crises such as natural disasters or acts of terrorism.

Meanwhile, others received good news on smaller contracts. NASA tapped 126 small businesses to receive 152 research contracts worth a total of $91 million.